According to a Reuters article, by any estimate, the stock in Peabody's management incentive plan is unusually valuable for a bankrupt company.
Peabody Energy (BTUUQ) predicts it will be worth $310 million based on a $3.1 billion lowball market capitalization. Critics contend the stock could be worth up to three times that amount. Former executive Fred Palmer estimates the initial stock award to Kellow could be worth as much as $43.5 million. That would top all restricted stock grants in 2015 by U.S. public companies with at least $1 billion in revenue, according to a survey by the Equilar consulting firm. Is there still time for the U.S. Trustee to do its job and put a stop to the huge Peabody Energy management compensation plan?
There are lots of impaired classes in the Peabody Energy reorganization plan including retail noteholders that will get .21 recovery on bonds. Nevertheless, somehow there is a lot of money for a management incentive plan for the Peabody Energy senior management team that caused the Chapter 11 and additional money for the rank and file workers who even get their cancelled Peabody Energy stock replaced with new stock unlike other equity holders.
I was pleased to see the U.S. Trustee was doing their job when I read Avaya's $3.7m bankruptcy bonus plan slammed by watchdog. The US federal bankruptcy slammed telco Avaya for its decision to award 11 execs $3.7 million in bonuses after the company filed for bankruptcy protection earlier this year. The US Trustee told a New York bankruptcy court that under the Bankruptcy Code, bonus payments to insiders of the type sought "are subject to a strict standard if they are for the purpose of inducing those insiders to remain with the Debtors' business." Trustee William K Harrington wrote: "Here, the proposal to pay cash awards to the members of the executive committee for merely performing the fiduciary duties they were hired to perform is not a basis to pay bonuses to these 11 insiders."
If the U.S. Trustee slammed a $3.7 million bonus plan with Avaya, why haven't they shot down Peabody Energy's bonus plan worth perhaps 100X this amount yet? Not only was it excessive, it comes at a time when Peabody could have 2017-level EBITDA of $1 billion and in its 2016 financial results filed on March 10, adjusted EBITDA was $303.3 million for the fourth quarter compared to just $53 million in the same quarter 2015. Also, President Trump is pro coal without the regulation of the Obama administration, which further enhances the coal industry's prospects.
I'd like everyone here to contact trustee William Harrington at the phone number in his listing under Massachusetts and ask him why the U.S. Trustee hasn't stepped in on Peabody Energy's executive compensation yet. Please also tell him about your other issues with the Peabody Energy reorganization plan, especially how it violates bankruptcy law 11 U.S.C. § 1123: US Code - Section 1123: Contents of Plan (a) (4), which requires the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest.
A U.S. Trustee trial attorney named Leonora Long introduced herself to a friend of mine/fellow Peabody retail noteholder who got to speak at the Peabody Energy confirmation hearing. She took down his name and information and said the U.S. Trustee Program appreciates his feedback, which he provided. He followed up with an email to her where he provided expanded feedback including his concerns. Here is his email to her. He hasn't heard back yet.
A fellow Peabody Energy retail noteholder recently spoke with Paul Randolph about his issues with the Peabody Energy reorganization plan. Please call Ms. Long and Mr. Randolph at the phone numbers shown here. The fellow Peabody Energy retail noteholder also filed a formal complaint with the U.S. Department of Justice Fraud Section, Criminal Division about Peabody Energy; please do so as well.
Also contact the U.S. Trustee people from your state and those under Missouri here. Also write comments below. I have a long list of U.S. Trustee and U.S. Department of Justice emails I send my Peabody Energy reorganization plan feedback and communications to, along with other government regulators and major media.
Know any good class action attorneys for retail noteholders and/or equity holders? If so, please message me here on Seeking Alpha.
I own $130,000 face value of Peabody Energy subordinated bonds maturing in 2018 and 2020 and $47,000 face value of Peabody Energy convertible bonds maturing in 2066.
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